DICKINSON AND CO Vs. BRISTOW

JUDGEMENT

(1.) The point raised by this appeal is one which might fairly be described as singularly devoid of merit. We have to decide a bare question of law.

(2.) Put in diagrammatic form, so to speak, the question may be thus formulated. A trading company in the year 1 sells goods on credit. The amount so owing to it is brought into account in the computation of its profits and gains for the year 1. In the years 2 and 3 events happen which, first of all, depreciate the value of that debt, and later on destroy its value altogether. In the accounts for the years 2 and 3 the Revenue accept the view that the depreciation and final devaluation of the debt should be made the subject of an allowance in those respective years. In the year 4 further events happen of a quite unusual and, indeed, unexpected nature, which have the effect of converting the debt which has been treated as bad into a perfectly good debt, which is paid in the year 4. The Revenue then says : "In taking the account of your profits and gains for the year 4, you must bring in that sum as a receipt. You have received it in the year 4, and you must bring in that sum as a receipt. You have received it in the year 4, and you must accordingly bring it into account." It is not a question of revising or amending, by additional assessment or otherwise, any of the assessments for the years 1, 2 or 3. The claim of the Revenue is to treat that receipt as a receipt of income for the year 4.

(3.) The only statutory provision which bears on this question to which I need refer is rule 3(i) of the Rules applicable to Cases I and II of Schedule D to the Income Tax Act, 1918. That sub- rule is as follows : "In computing the amount of the profits or gains to be charged, no sum shall be deducted in respect of. . . any debts, except bad debts proved to be such to the satisfaction of the Commissioners and doubtful debts to the extent that they are respectively estimated to be bad." Then there is a provision as to bankruptcy or insolvency : "In the case of the bankruptcy or insolvency of a debtor, the amount which may reasonably be expected to be received on any such debt shall be deemed to be the value thereof."